Zoe Christodoulou
A new amendment, to the already significant tax break for high earners, has been introduced into local law with effect as of 1 January 2022, further improving the current scheme. While the requirement of non-residency prior to first employment on the island, has increased from 10 to 15 years, the amendment otherwise provides greater flexibility to individuals already benefiting from the scheme or planning to do so. This is evident in a number of ways, but most importantly from the fact that individuals benefiting from the 50% tax exemption will be able to change employers without affecting their eligibility, providing an overall positive change.
The broadening of the tax exemption eligibility reflects the country's strategic aim to attract top talent globally. Offering flexibility in employment choices and a widened pool for tax benefits, Cyprus reinforces its commitment to fostering a dynamic, growth-oriented economy while positioning itself as a preferred destination for tech, innovative and dynamic companies and their high-skilled professionals from around the world.
The Legal Jargon
Article 8(23A) of the Income Tax Law previously granted a 50% exemption from income tax to individuals for their first employment in Cyprus provided that such individuals were not tax-residents of Cyprus for 10 years prior to their first employment and provided that their annual remuneration exceeded €55,000.
On 30 June 2023 the law amending Article 8(23A) of the Income Tax Law was published, affecting the tax exemption eligibility criteria. The changes apply retroactively, effective as of 1 January 2022.
According to the recent change, the 50% tax exemption will apply to individuals who were not residents in the Republic or have not performed any salaried services in the Republic, for at least 15 years prior to their employment. Further, it will have a lifespan of 17 years from the date of first employment even if the employee changes their employer within that period.
Further, the amending law clarifies that the tax exemption may still be applicable if the minimum annual salary of €55,000 is not exceeded in the first year of employment but is exceeded in the year following the first year of employment.
Individuals who were previously eligible for the tax exemption based on the previous provisions of Article 8(23A) will continue to benefit provided that all the conditions, as they were in effect before the amending law, are met.
How we can Help
At Royal Pine, our interdisciplinary team is able to assist you throughout your business relocation journey. When it comes to human resources, we can help you relocate highly proficient employees and assist with their registration with the relevant authorities while ensuring that immigration compliance matters are taken care of. We complement our array with payroll management and employment law advisory to ensure that you get the end-to-end relocation package you need for your peace of mind.
* This publication has been prepared as a general guide and for information purposes only. It does not purport to be comprehensive or to render professional advice. Before making any decision or taking any action that may affect you and/or your business, bespoke advice should be obtained.
